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“He doesn’t realize it, but I know everything about him,” says Indian retail magnate Kishore Biyani about a young man sitting with him in a Mumbai hotel meeting room in early December. “I see that he is wearing Colour Plus trousers. I know his waist size … I know everything about him. We are a company of observers, and everybody is trained to observe customers,” says Biyani, who is CEO of the Future Group and managing director of its flagship Pantaloon retail chain that last year had revenues of $450 million and expects to become a $1 billion company by mid 2007. Biyani often spends Sundays hanging about unobtrusively and watching shoppers at his company’s 200 clothing stores in 32 Indian cities. The home-grown retailer’s obsession for observing the average Indian consumer also at public places like temples and movie halls underscores what could be Wal-Mart’s biggest challenge as it sets up shop in India in partnership with Bharti, a leading telecom services provider.“India is a very diverse country – we have 6,000 castes and sub-castes in 28 states, and every community has its own tastes; every state has its own nuances,” says Biyani. “To manage the diversity and the heterogeneity will be one of the biggest challenges for anybody who comes to this market.”Enigmatic India and its challenges in transportation, warehousing and distribution infrastructure haven’t deterred the world’s biggest organized retailers that have lobbied – unsuccessfully so far – with the Indian government to permit foreign direct investment in the retail industry. Wal-Mart battled stiff opposition from Indian retail chains and found an open backdoor, forming a joint venture with Bharti to supply back-end supply chain technology and related processes; Bharti will handle the front-end of owning and running the stores, which are likely to be co-branded. The terms of the deal haven’t been disclosed, but media reports put Wal-Mart’s proposed investment in the venture at $100 million initially, rising to $450 million in a few years.Cash and CarryWaiting in the wings and actively negotiating with several Indian companies as potential partners are Tesco of the U.K. and Carrefour of France. Some, like Germany’s Metro and South Africa’s Shoprite, have already entered India with a cash-and-carry business that supplies only retailers, restaurants and business houses where the Indian government permits FDI. Wal-Mart is also entering the cash-and-carry business, with Bharti supplying Wal-Mart’s stores in India. Moreover, many large Indian companies – including Reliance Industries, the Aditya Birla group, and other regional firms – have recently announced ambitious plans in retailing. India’s retail industry is one of its fastest growing (with a 5% compounded annual growth rate) and has $320 billion in annual revenues this year, according to a report titled, “Retail in India: Getting Organized to Drive Growth,” released recently by consulting firm A.T. Kearney and the Confederation of Indian Industry (CII). Never mind that Wal-Mart’s $315.6 billion in global sales last year is about the size of the entire Indian retail industry. “Rising incomes and increased consumerism in urban areas along with an upswing in rural consumption will further fuel this growth to around 7%-8%,” the authors say, pegging India’s consumer class with rising disposable income at 400 million people.But now that Wal-Mart plans to enter India, attention is focused on the retail giant’s India strategy. Wharton professor of marketing Jagmohan Raju says one big challenge Wal-Mart will face in India has to do with how it is perceived by consumers. “In the U.S., when you think of a big warehouse store, you think of lower prices, and small, boutique stores have higher prices,” he says. “In India, the perception is exactly the opposite – the bigger store has higher prices; smaller shops can offer lower prices because their overheads are lower. How will Wal-Mart’s positioning of lower prices carry forward in a mindset where customer perceptions of big versus small are so different?”Consumer Behavior David Bell, Wharton professor of marketing, says Wal-Mart’s business model is founded on “everyday low prices for consumers and squeezing costs out of the system, and customer service with friendly people who greet you.” But those, he argues, do not guarantee shopper traffic, as consumer behavior is dramatically different across global markets. Coca-Cola might adjust to people’s preferences in different markets by making its drink sweeter or more effervescent. Or McDonalds could allow people to consume alcohol at its restaurants in France and make hamburgers with rice patties in Japan. “But there’s considerably more variation in the way people shop for products than their underlying preference for the products themselves,” Bell says. “This is what makes it more difficult – not just for Wal-Mart in particular, but for any retailer – to be truly global.”Changes in consumer preferences that Wal-Mart will encounter have to do with simple things like how often people like to go to a store or what motivates them to choose one store over another. “In local markets, you have dynamics of retail competition, variations in the frequency with which people like to shop, variation in the kind of products that drive people to the store, variation in the importance of the retail assortment.”It is too early to tell if some of the controversies Wal-Mart has faced in the U.S. will crop up in India, too. “In the U.S., a number of small towns did not like Wal-Mart for a couple of different reasons,” says Bell. “One is purely aesthetic – these big boxes look pretty ugly – and the practice of having huge buying power can be detrimental to the local economy – people who try and compete on price. Thirdly, they are criticized for their employment practices, such as their benefits, and ethnic and gender discrimination in hiring.”Wal-Mart’s most immediate challenge could be finding real estate at preferred locations and financing it at the prevailing prices. Biyani says his group bought most of its real estate long before the current price boom. “If we were to do business at today’s rates, we’d have to shut down,” he says.“The Wal-Mart model is very real estate hungry,” says Raju. “They need a lot of real estate, close to where people live, and have easy access to them. The Wal-Mart model also relies on the fact that everything is on display, which requires lots of space.” Raju notes that if, as many industry watchers expect, Wal-Mart sets up its stores on the outskirts of urban centers, other challenges could emerge. “If you are going to travel by train, you’ll have to carry your purchases in a bag, and then you’ll buy less,” he says. “If you drive your car there and load it up, Wal-Mart should have a place to park all those cars.” Some industry experts have argued that the typical Indian consumer does not travel more than 6 km (3.75 miles) or 7 km to shop, and that few suburbanites own cars.Raju says he expects Wal-Mart to adopt a blended model of its traditional format tweaked to fit the reality of Indian real estate. “It would be stores where you have all the products on display, but you don’t pick it up and put it in your cart yourself.” This would involve something like a handheld computerized device, he says, into which customers enter information about the products they want to buy. They would then collect their purchases at a checkout point at street level and drive away, or have them delivered to their homes.More blending might be on the way, especially in cultural nuances. Wal-Mart’s recent debacles in Germany and Korea, where it sold out to local retail players and exited, could be wake-up calls. In Germany, Wal-Mart’s low price strategy failed to win it a distinctive market position simply because two other well-entrenched retailers – Aldi and Lidl – have been following that strategy for years, says Bell. He notes that Wal-Mart was also faulted for relying too heavily on a U.S.-driven view of how Germans shop, made worse by populating its top management in the country with U.S. expatriate executives, many of whom couldn’t speak German. Thirdly, the Wal-Mart strategy of a price-service combination with friendly greeters and so forth backfired. “Culturally, greetings and friendliness in stores are viewed by the Germans with a lot of suspicion,” says Bell.Rites of PassageWal-Mart also had some lessons to learn in South America a couple of years ago, when it discovered that the design and layout of its stores did not match shopper preferences. “In South America, shopping for some families is a social or an entertainment-driven event,” says Bell. “You have the whole family or the extended family shopping together, so you need much wider aisles.” That, he says, is unlike what Wal-Mart is used to in the U.S., where a single person typically shops for the entire household, while other family members are looking after the children or at work. “It seems like a fundamental thing, but you could never predict that coming from the outside unless you have a local partner.”Chastened by these experiences, Wal-Mart may not face the same problems in India. Bharti, its local partner, is a leader in the mobile phone services industry and must have deep insights into Indian consumer behavior patterns. Even so, there could be surprises, as Biyani’s Big Bazaar store chain learned the hard way a couple of years ago. The chain had bought 100,000 white cotton shirts, expecting good demand. But sales were slow, and promotional campaigns fell flat. It soon figured out why: The demographic profile of Big Bazaar’s middle-class shoppers meant people who commute in crowded trains and buses and not in air-conditioned cars. For them, white shirts are high-maintenance hassles, needing frequent laundering. The group eventually liquidated its unsold inventory of white shirts through heavily discounted sales. Wal-Mart’s legendary success at procuring its supplies at extremely competitive prices has no doubt pleased its customers to whom those savings are passed on, but critics have accused it of compelling its suppliers to survive on very thin margins. Here, Biyani says he works differently. “We are not like Wal-Mart; we believe in a situation of win, win and win,” he says. “The supplier should win, we should win and the customer should win. In Wal-Mart’s strategy, and maybe that of other international retailers, the company wins and the customer wins. Somebody has to lose for those two to win.” Future Capital Holdings, a Biyani-run private equity firm, last month raised $830 million that it has begun investing as vendor financing in manufacturers of foods, garments and fashion jewelry, among others. Products of these companies get captive shelf space at the Future Group stores.Raju says existing national brands will need to plan their response to Wal-Mart very carefully to ensure that while they get to supply the retail giant, they also don’t alienate their smaller store buyers. “They are used to it in the U.S.,” he says. “Right now, Hindustan Lever deals with a lot of small stores. Tomorrow they will be dealing with large buyers like a Wal-Mart or Reliance Retail, so the relative power structure of buyers and who is supplying will change. This is a challenge they have faced in developed markets where they deal with the Tescos and Safeways.” He expects the national brands in India, such as Hindustan Lever and Procter & Gamble, to figure out ways to help small stores with specially tailored services “to ensure they also thrive and do well.”Raju sees bigger benefits flowing to other players in the retail supply chain, such as farmers. “Companies like Wal-Mart coming to India, I hope, will help farmers because there will be fewer players in the chain,” he says. “Farmers could form cooperatives to supply directly to Wal-Mart rather than have to deal with multiple intermediaries.”Party SpoilersIndia’s retail promise must seem tempting, but that outlook “is tempered by the fact that the country is grappling with severe infrastructure and policy issues,” says the CII in the report it produced with A. T. Kearney. “Cold chains [distribution chains for perishable items], warehousing and logistics infrastructure will fast become unmanageable challenges for India if proactive action is not taken.” It points to policy regimes that vary across states, “inadequate quality control and the lack of a skilled workforce.”Biyani doesn’t buy all that, arguing that “India is a nation of dukaandars (shopkeepers) and that enough retail talent is available. He also dismisses concerns about distribution and logistics infrastructure with a simple, rhetorical question: “Have you [in the recent past] faced a shortage of anything you wanted to buy?” Biyani scoffs at Wal-Mart’s logistics and supply-chain strengths. “Where will they run their Volvo trucks here?” he asks, adding in a lighter vein, “They will probably have to have bullock carts and handcarts in their supply chain.”Raju points out that Wal-Mart’s efficiencies stem from the scale of its purchases, which determines what prices it pays suppliers.“Suppliers are willing to work with them because if they don’t work with them they lose a big part of the market,” he says. The Wal-Mart buying center at its Bentonville, Arkansas, headquarters “is huge, and that’s why most of the companies’ vendors have their branch offices in the city where Wal-Mart’s headquarters are located,” adds Raju.Coping with OversupplyOrganized retail is just beginning in India, but plans call for some 600 malls to be built over the next decade across the country. The nascent industry in India could learn valuable lessons about what went wrong with retailers in the U.S., leading to bankruptcies, closures and sell-offs at companies like K-Mart, Caldor and Bradlees.“What went wrong [in the U.S. market] is oversupply,” says Martyn Chase, chairman of Donaldson, a London-based company that manages 350 retail malls across Europe. “One mall gets built, and somebody builds a new and bigger mall nearby, so the previous one is killed.” He doesn’t see an immediate threat of that happening in India, but says “you will get casualties in 10 years when you have too many of them.”Chase says the way to prevent hemorrhaging and consolidation in the industry is to bring regulatory oversight. “You need proper regulations governing mall locations, mall size and the like,” he says. “Before you are allowed to build a mall in the U.K., you have to demonstrate there is a need for it, by proving that there is enough demand from people who live in that area to make the mall work.”Biyani argues that the underlying dynamics of standalone retail are not attractive. (Pantaloon’s urban locations put it in a different market segment from that of the big box centers Wal-Mart might put up on city outskirts.) “In India, no retailer has made big money so far,” says Biyani. (Pantaloon’s profits last year were 3% of revenues.) “The money is in the peripheral activities; it’s never in the retail itself. It’s the power of retail that gets you the money; it’s never the transaction that gets you the money.” Related Itemsread more

Paris: Rafael Nadal’s return to the world number one position for the eighth time in his career was confirmed when the ATP rankings were released on Monday.The Spaniard leapfrogs Novak Djokovic even though the Serb sealed his fifth Paris Masters title on Sunday with a 6-3, 6-4 victory over Canadian Denis Shapovalov. Nadal, whose last stint at the top ended a year ago on November 4, 2018, withdrew from his semi-final against Shapovalov in Paris with an abdominal muscle strain.Djokovic slips down the rankings because he loses the points that he won a year ago in London when Nadal was absent.The 2019 battle between Nadal, winner of the French and US Opens, and Djokovic who triumphed in Australia and Wimbledon is set to go to the wire as either could still finish the year at number one.If the Spaniard does not play or fails to win a round-robin match at the World Tour Finals, Djokovic must claim two group-stage victories and make the final to pass him.Djokovic would also be sure of the year-end top ranking should he win the tournament and Nadal does not reach the semis.Nadal first reached number one on August 18, 2008 when he was just 22. He has spent 197 weeks at the top, the sixth-highest in ATP history behind Roger Federer (310), Pete Sampras (286), Djokovic (275), Ivan Lendl (270) and Jimmy Connors (268).Gael Monfils returns to the top 10 for the first time since February 2017 after reaching the semi-finals in Paris while 20-year-old Shapovalov climbs 13 places to a career-high 15.Latest ATP rankings:1. Rafael Nadal (ESP) 9,585 pts (+1)2. Novak Djokovic (SRB) 8,945 (-1)3. Roger Federer (SUI) 6,1904. Daniil Medvedev (RUS) 5,7055. Dominic Thiem (AUT) 5,0256. Stefanos Tsitsipas (GRE) 4,000 (+1)7. Alexander Zverev (GER) 2,945 (-1)8. Matteo Berrettini (ITA) 2,670 (+1)9. Roberto Bautista (ESP) 2,540 (+1)10. Gael Monfils (FRA) 2,530 (+3)11. David Goffin (BEL) 2,335 (+3)12. Fabio Fognini (ITA) 2,29013. Kei Nishikori (JPN) 2,180 (-2)14. Diego Schwartzman (ARG) 2,125 (+1)15. Denis Shapovalov (CAN) 2,050 (+13)16. Stan Wawrinka (SUI) 2,00017. Karen Khachanov (RUS) 1,840 (-9)18. Alex De Minaur (AUS) 1,77519. John Isner (USA) 1,770 (-2)20. Grigor Dimitrov (BUL) 1,747 (+7) Get the best of News18 delivered to your inbox – subscribe to News18 Daybreak. Follow News18.com on Twitter, Instagram, Facebook, Telegram, TikTok and on YouTube, and stay in the know with what’s happening in the world around you – in real time. alexander zverevatpatp rankingsDaniil Medvedev First Published: November 4, 2019, 5:43 PM ISTread more